RBA signals further rate hikes but not as market expects and questions use of YCC in the future
|Asia Market Update: RBA signals further rate hikes but not as market expects and questions use of YCC in the future; BOK Gov leaves option of larger rate hikes.
General trend
- Markets off to a strong start with little fresh catalyst due to US markets being closed for holiday.
- US FUTs rising off Friday levels, general dollar softness across the majors.
- Macau casino names trade higher despite covid cases, talk of a quarantine free business travel corridor between Hong Kong and China.
- RBA Lowe, YCC report and June meeting minutes major focus of the session. Lowe tampered expectations of a larger then 50bps rate hike and warned the markets hikes may not follow projected path. Aussie yields fell.
- China covid cases noted to be cropping up in more southern region, while Beijing and Shanghai seem to remain under control.
- Crypto currencies continue decline, sparking fresh round of calls for more regulation.
- Prelim June trade data for South Korea showed weakening chip exports.
- Japan Fin Min notes inflation response undecided.
Headlines/Economic data
Australia/New Zealand
- ASX 200 opened +0.3%.
- (NZ) New Zealand Q2 Westpac consumer Confidence: 78.7 v 92.1 prior (record low).
- (AU) Reserve Bank of Australia (RBA) Issues Review of Yield Target: Yield targets was successful in reaching its objectives and reinforced bank's forward guidance about cash rate but in hindsight may not have extended YCC.
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence W/W: +1.6% v -7.6% prior.
- (AU) Reserve Bank of Australia (RBA) Gov Lowe: To do what's needed to return inflation to target range; Emphasizes that RBA is not on a preset path for rate hikes.
- (AU) Reserve Bank of Australia (RBA) Gov Lowe Q&A: Expects to discuss both a 25bps and 50bps hike in July; Rate Hike trajectory implied by market is not very likely.
- (AU) Reserve Bank of Australia (RBA) June meeting minutes: 25bps increase every meeting would be rapid tightening; agreed risk inflation would not return to 2-3% target if policy settings maintained.
Japan
- Nikkei 225 opened +1.2%.
- 6502.JP CEO Shimada: No plans to sell or restructure units other than those already announced - Japan press.
- (JP) Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 25bps; Opens window to buy unlimited amount of 10-year JGBs at 0.25% [as expected].
- (JP) Japan Fin Min Suzuki: Believe that current inflation is due to increases in commodity prices; Doesn't believe debate on fiscal health has receded.
- (JP) Japan MoF sells ¥2.5T v ¥2.5T indicated in 0.005% 5-year JGBs; Avg Yield: 0.0830% v 0.0170% prior, bid-to-cover: 3.17x v 3.40x prior.
Korea
- Kospi opened +0.5%.
- (KR) Bank of Korea (BOK): Cannot rule out posibility of CPI >4.7% for 2022 (v 4.5% guided); To be 'well above' 5.0% for a while after May reading came in at 5.4%.
- (KR) South Korea June 1-20 Exports Y/Y: -3.4% v +24.1% prior; Imports Y/Y: 21.1% v 37.8% prior; Chip Exports y/y: 1.9% v 13.5% prior.
- (KR) Bank of Korea (BOK) Gov Rhee: CPI situation is grave; To focus on CPI until situation changes.
China/Hong Kong
- Hang Seng opened +0.5%; Shanghai Composite opened 0.0%.
- (HK) Hong Kong Monetary Authority (HKMA) continues to defend the currency peg, buys approx HK$5.22B.
- (HK) Hong Kong to propose quarantine free business travel corridor with mainland China - SCMP.
- (CN) China PBOC sets Yuan reference rate: 6.6851 v 6.7120 prior.
- (CN) China PBOC Open Market Operation (OMO): Sells CNY10B in 7-day reverse repos v CNY10B prior; Net CNY0B v Net CNY0B prior.
- (CN) China National Development and Reform Commission (NDRC) investigation of deals made by power plants found contracts that exceeded reasonable levels and sellers were told to refund excess payments.
- (HK) Hong Kong Monetary Authority (HKMA) continues to defend the currency peg, sold HK$665M on June 20th; Sold $6.63B last week and $9.54B so far in 2022.
North America
- SAVE JetBlue improves offer to total consideration of all cash $33.50/shr (prior $31.50).
Europe
- (DE) Germany labor union, IG Metall, calling for up to 8% increases in wages - press.
- EZJ.UK Said to be planning to cut 10,000 flights that were on the schedule for this summer (July-Sept), destinations include Greece and Spain; expected to impact 1.5M fliers - UK press.
- (UK) Local Government Association: Cafford to pay a mandated increase in the legal minimum wage over the next year without a £400M cash injection from the national govt - press.
- (NL) Netherlands Energy Min Jetten: Gas storage in the Netherlands needs to be filled above levels set by EU.
Levels as of 01:00ET
- Hang Seng +1.5%; Shanghai Composite +0.2%; Kospi +0.9%; Nikkei225 +2.3%; ASX 200 +1.4%.
- Equity Futures: S&P500 +1.6%; Nasdaq100 +1.7%, Dax +0.6%; FTSE100 +0.5%.
- EUR 1.0543-1.0508; JPY 135.21-134.94; AUD 0.6983-0.6948; NZD 0.6349-0.6328.
- Commodity Futures: Gold 0.0% at $1,840/oz; Crude Oil +2.2% at $110.33/brl; Copper +0.1% at $4.01/lb.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.